June 15, 2022 | Last Updated on: April 15, 2024
McDonald’s is the largest, and one of the most recognizable, fast food chains in the world. There are more than 13,000 McDonald’s restaurants in the United States, and at least 90 percent of those businesses with golden arches are owned and operated by franchisees.
Are you thinking about joining the people already franchising McDonald’s locations? Are you wondering if it’s the right franchise opportunity for you? This article will explain what you need to know to decide whether it’s a good business opportunity, how to become a McDonald’s franchisee, and the steps it takes to get there, including how to secure a franchise loan.
Before you decide to become a McDonald’s franchisor, you must carefully review the company’s Franchise Disclosure Document (FDD). This almost 400-page document explains the rights and responsibilities of a McDonald’s franchise owner, including:
The document contains a lot of legal and business terminology. You may want to hire a business or corporate lawyer experienced in franchising to help you understand the FDD. Don’t commit to a McDonald’s franchise unless you’re one hundred percent clear about what you’re getting into.
A physical copy of the FDD can be purchased online. However, you can also access a free digital PDF.
Tip: The FDD includes a 15-page franchise agreement. It’s critical to have a lawyer look It over and explain it to you, so you understand your rights as a franchise owner. Also, have a lawyer or accountant review Item 19 with you. It explains the costs of opening a franchise and the amount of money you can make depending on location.
Becoming a Mcdonald’s franchisee isn’t cheap. You’ll be required to invest money upfront. New franchisees need a minimum of $750,000 in personal liquid assets. This money has to be yours and cannot come from a loan.
If you’re purchasing an existing restaurant, you must put up 25 percent of the total purchase price as a down payment. For a new restaurant, you must be able to pay 40 percent of the cost upfront. Costs for equipment and other supplies usually run from just under one million to just over two million dollars. You can get a loan to pay your initial equipment and supply costs.
McDonald’s will charge you a service fee of four percent of total sales. Also, $45,000 of your initial franchise fee goes direct to McDonald’s.
While the total costs to get started are considerable, McDonald’s restaurants averaged just over three million dollars in annual sales in 2020, according to Franchise City. That can translate into profits of more than $150,000 per year for franchise owners. In other words, the high startup costs can provide a solid payout over time.
Did you know: The costs of running a McDonald’s franchise are comparable to those of other fast food franchises?
You have limited ability to make choices as a franchisee. You have some freedom as to when you operate the restaurant and who you hire to work in it. However, you must follow many rules set down by the McDonald’s corporation.
McDonald’s will make you use certain suppliers to purchase food, packaging, equipment, and other supplies. You cannot go off on your own because the company wants the customer experience in all its locations to be identical.
If McDonald’s advertises a national special or releases a new product, your restaurant must offer it at the prices and on the dates set by the company. You may be able to offer your own specials, but you will have to get approval from corporate first.
Did you know: The McDonald’s dollar menu is controversial for franchise owners? Many lose money on it. However, they’re required to offer and actively market it.
To apply to operate a McDonald’s franchise, you must prove you have:
The application process is done online. You will be asked for basic information, like:
After your application is accepted, there will be a phone interview, along with personality and ability tests.
Once the phone interview and testing phase is complete, you will spend a few days working in a McDonald’s restaurant while being watched. Next, you’ll undergo a panel interview to see what you’ve learned, and you’ll meet with current franchisees so you can ask questions about operating a McDonald’s.
Finally, if you successfully make it to this point, you will be invited for a one-on-one interview at a McDonald’s headquarters near you. After this interview, McDonald’s will decide whether to allow you to operate a franchise
Before you can operate your restaurant, McDonald’s requires you to participate in nine to 18 months of intensive corporate training at a McDonald’s restaurant near your home. There are also several seminars, conferences, and one-on-one training sessions you will be required to attend. You will learn everything you need to know to run a McDonald’s successfully, including developing a business plan for it.
Finally, you’ll need to take operating training classes, which are two advanced five-day courses, that are taught in Oak Brook, Illinois.
When you open or purchase your franchise, you’ll need to hire several professionals to help with construction, legal issues, operating your business, finances, and more.
You should hire a franchise consultant and lawyer as soon as possible. Make sure you have a legal professional overseeing all transactions. Hire a lawyer with franchise experience and not just a general business lawyer. They’ll know what pitfalls to look out for.
If you’re opening a new McDonald’s, you may also need to hire a construction crew. A franchise consultant can help you with that.
If you decide to open a new McDonald’s location, take time to understand the requirements for a franchise building. In most cases, the building will be at least 4,000 square feet. The site should have at least 50,000 square feet to build on and be located near the corner of two major streets. There should be plenty of space for parking, and you must be able to build to a minimum height of just over 23 feet.
Before opening your McDonald’s restaurant business, you must buy food and supplies from McDonald’s suppliers, figure out how to deal with waste management (private arrangement with a dumpster or local trash service), and set your hours. You also need to apply for the necessary permits to run a restaurant in your local area.
Tip: Setting your business hours can be complicated. Most cities have regulations about how early or late businesses can operate. You may be in a 24-hour zone but operating 24 hours may not make sense because of the cost of labor, utilities, and everything else required to keep a restaurant running when compared to how much you can earn. To figure out your hours, check those of other similar establishments in your area, and model your opening and closing times on theirs.
Before opening, you must hire full-time and part-time employees, including kitchen workers, servers, janitors, managers, and the other types of workers needed to run your business. The McDonald’s corporation has applications they require for the hiring process. You can download and print applications for various positions online, or you can order packages of them from McDonald’s. Take time to interview employees and check references. If you have doubts about anyone, move on. Your operation will only be as good as your team members.
Sometimes, a soft opening with special promotions and deals is an excellent way to get a McDonald’s location launched. It will draw in a limited number of customers and generate early interest and excitement before your official opening. It will also provide time to work out any issues before opening day. Once your location is running dependably, announce your official opening day and promote it.
After you open your franchise, you will still have to pay fees to the McDonald’s corporation, including a monthly service fee, typically about four percent of total sales. You’ll also have to pay monthly rent for your building. The base rent cost depends on the size and location of your franchise.
In the end, deciding whether to become a McDonald’s franchisee is up to you. However, you owe it to yourself to do your due diligence to know what you’re getting into.
